GE YANHONG v. WANG CHUNYANG AND ANOTHER

HCA 839/2016

[2018] HKCFI 1091

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 839 OF 2016

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TRANSCRIPT OF ORAL DECISION[1]

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1.  This is my decision.  In this action, the plaintiff claims that certain subscription shares were hers beneficially, but somehow, were siphoned off by the 1^st and 2^nd defendants through some fraudulent schemes.

2.  The key issue raised by the pleadings is whether the plaintiff holds the subscription shares beneficially or as nominee to one Mr Cheng.

3.  Among the circumstances pleaded [that are in issue] are [the time] when the blank transfer forms were given to the plaintiff to sign, and whether they [were] given together with the other subscription documents to the plaintiff to sign.

4.  The defendants now seek to make quite a number of amendments to their Defence, some of them are not objected to, but certain amendments [are], which I roughly categorise as these, namely the withdrawal of an admission by the defendants that the blank transfer forms were given to the plaintiff some time in April 2014 together with the subscription forms, and [another admission] that they were signed by the plaintiff together with the subscription forms in April 2014.  Such were pleaded in paragraphs 7 and 8 in the Statement of Claim, and were originally admitted in paragraphs 17 and 18 of the Defence. 

5.  Now, together with this application for amendment is another application by the 2^nd defendant to file a supplemental witness statement, but the parties agree that the result of this summons to file supplemental witness statement would follow that of the amendment summons.

6.  Regarding the amendment summons, in relation to those objected parts, there is no dispute, as I just mentioned, that they are withdrawal of admissions on those two matters. 

7.  Counsel have addressed me as to the principles to be applied.  There is, in my view, no real dispute between [them as to] what the principles are, but respective counsel urges me to place different emphasis on different principles. 

8.  Counsel for the defendants submits that I should apply the principles as laid down by Ketteman v Hansel Properties Limited[2], as in general amendment situations, albeit Mr Wong does not seriously dispute that the principles in relation to the withdrawal of admissions submitted by Mr D’Souza for the plaintiff are applicable, albeit it is Mr Wong’s submission that less emphasis should be placed on those principles in relation to the withdrawal of admissions. 

9.  In relation to the principles applicable to the withdrawal of admissions, the parties do not seriously dispute them.  They are set out in the Court of Appeal judgment of Re Ng Wai Jing[3], where, it is said that in exercising its discretion, the court will consider all the circumstances of the case, and seek to give effect to the overriding objective, and this overriding objective, obviously, refers to the main aim in the Civil Justice Reform, namely to secure the just resolution of the disputes between the parties, according to their substantive rights.  In that Court of Appeal case, it’s also said that amongst the matters to be considered will be - the reason and justification for the application which must be made in good faith, the balance of prejudice to the parties, whether any party has been the author of any prejudice they may suffer, the prospect of success of any issue arising from the withdrawal of an admission and the public interest in avoiding, where possible, satellite litigation, disproportionate use of the court resources, and the impact of any strategic manoeuvring.  And obviously, if the amendment affects certain timetable or causes delay, it should also be properly considered. 

10.  So the parties are agreed that the primary aim - securing the just resolution - is the key factor.  Mr D’Souza attempted to persuade me that one of the more powerful factor - whether convincing and credible explanation of why the withdrawal of the admission was required - is pivotal in the present case.  His submission is that in the circumstances, the failure by the defendants to give such explanation should be seen by the court, by default, as implying bad faith on the part of the defendants. 

11.  It is agreed by counsel that it is ultimately a balancing exercise.  So I therefore am driven to first consider whether my giving leave to amend or refusal to amend would significantly affect this main objective of securing the just resolution.  In this regard, it was submitted to me by the defendants that the refusal to amend would mean that the defendants are bound to run a factual story that, according to them, was not true and they have no conviction in; and obviously pleadings are pivotal in controlling what the issues are, and also, to a large extent, on what questions can be put to witnesses at trial. 

12.  I agree with Mr Wong that if the amendment is refused, then their clients are bound to run a factual case that is different from what they are now alleging.  And also, in the evidence to be given by Mr Yeung, and potentially other witnesses, namely, in particular, one Mr Gavin Cheng who Mr Yeung said was the person who handed the blank transfer forms to the plaintiff to sign in November 2014, and evidently, it is quite likely the defendants would also be constrained in the questions they would be able to put at trial to the plaintiff.  I consider those matters significant in whether the defendants would be given the full opportunity to litigate the dispute at hand. 

13.  It is submitted by the plaintiff that the central issue, as I mentioned, is whether the plaintiff herself is a nominee, and these two issues as to whether the blank forms were given together with the subscription documents and signed by the plaintiff in April rather than in November, [are] irrelevant [to that central issue]. 

14.  I, with respect, disagree.  In my view, in the just resolution of the disputes, the credibility of the plaintiff versus that of the two defendants would be quite crucial at trial.  Moreover, the cogency of various material aspects of their respective stories would no doubt be severely tested at trial. 

15.  For these reasons, I disagree with the plaintiff that the amendment or its refusal would not affect whether a chance to have a just resolution of the dispute would be given to the defendants. 

16.  So with that conclusion, I attempt to weigh all the other factors to decide how I should exercise this discretion.  It is, I think, rightly accepted by Mr Wong that the explanation given by Mr Yeung, D2, as to why the amendment is needed, as to what caused the mistake is far from satisfactory, in that he [only] stated in his affirmation that it was an honest oversight as to the defendants’ position.  There was no other [explanation] as to why is it that the defendants made the admissions in paragraphs 17 and 18.  I do regard this explanation as not quite satisfactory, so that is a factor that weighs against giving the amendment. 

17.  However, I am not convinced by Mr D’Souza for the plaintiff that because there is a lack of good explanation, therefore it necessarily implies bad faith.  Mr D’Souza in fact submits that without the explanation, the court would not be able to ascertain whether the amendment is made by good faith or bad faith, that is the situation, and of course, the burden to persuade me to give the amendment is on the defendants. 

18.  The plaintiff also submits that the amendments would cause her prejudice in a number of ways.  Firstly, it is said that by making the amendment now, she lost the opportunity to locate witnesses which she would have been able to, in June 2016 at the time the Defence was first filed.  I look at the plaintiff’s affirmation in some detail to ascertain the substance of this claim.  All she said was that the staff of the opportunity fund has left, together with Yeung, which as we sorted out in the hearing, would be December 2015.  And because the staff has left, she cannot locate the relevant witness.  As I mentioned, as is sorted out, the timing of them leaving was, in fact, December 15th, 2015, which was before the filing of the Defence, so it seems to me that the opportunity to locate witnesses, according to the plaintiff herself, has been lost regardless of whether there is this amendment to withdraw admissions. 

19.  Also, there was no detail whatsoever as to who would likely be the witness, and the reason why that witness is such a relevant witness, as well as the reason why he or she cannot be located.  All it was deposed to by the plaintiff was a bare assertion that they cannot be located. I therefore come to the view that such prejudiced is not as real as claimed.

20.  It was also said, secondly, that the amendment deprived her the opportunity to locate documents.  I do not think that is a valid prejudice, the said blank transfer forms no doubt in my mind, are documents central to this litigation, regardless of whether those admissions were made and now sought to be withdrawn.  No doubt, the legal team of the plaintiff had already had made their due effort to locate and safekeep those documents.  This claim that the amendment would cause the loss of an opportunity to locate documents, I find, has no substance. 

21.  It is also said, in the plaintiff’s affirmation, that the original cannot be located, and therefore the opportunity for an expert to ascertain the date of the signature by examining the ink [is lost]. Again, I find this is a disingenuous claim.  As I mentioned, the original document should have been located and safekept.  Also, so far as I am aware, it would be most difficult, if not impossible, nor did the plaintiff substantiate its claim, that experts would be able to examine the ink and distinguish whether it was signed in April, as opposed to signed six months later, in November. 

22.  I am therefore driven to conclude, in this balancing exercise, that the prejudice suffered by the plaintiff is minimal, if not non-existent.  As to other factors, I note that the trial is still in a stage of preparation, the parties have just filed their witness statements.  Albeit that the amendment would cause some delay, but in the timeframe of this action, that is not a very important factor, in my view.

23.  In respect of the prospect of success point raised by the plaintiff, I take the view that these two issues raised by the withdrawal of admissions are questions of fact, which would not and should not be evaluated by affirmation evidence; and at this point, I consider the prospect of success factor as not assisting one way or the other. 

24.  There is also a judgment by Madam Le Pichon, Deputy High Court Judge as she then was, in April 2017, in relation to an application for an interlocutory injunction in HCA 1645/2016, in which Yeung was also a defendant, and apparently also in relation to the same investment fund as in this case.  But I think during the course of submission, Mr D’Souza for the plaintiff very fairly and correctly accepted that what was said in that judgment is neutral, so far as the basketful of factors to be considered in this case [are concerned]. 

25.  With those factors so assessed, and bearing in mind the key consideration is securing the just resolution of disputes between the parties, I therefore conclude that in the exercise of my discretion, I should grant the amendment as sought by the defendants.

26.  It follows that I would also grant leave for the 2^nd defendant to file the supplemental witness statement as sought. So with that decision, I hear parties on costs and consequential directions.

(Discussion re costs and consequential directions)

27.  I rule, in this regard, I am in favour of Mr D’Souza[‘s submission on costs].  Albeit [I was] persuaded that this amendment should be allowed to enable just resolution of the dispute in the parties, it is clear in the case laws that an explanation by the amending party is called for.  And in this present application, that was clearly lacking.  And it was really in a delicate balancing exercise that I ultimately concluded leave should be given. I agree with Mr D’Souza that this is a case that the court would not fault a litigant in the position of the plaintiff to say that they should have consented [to the application]. The plaintiff’s contest against it, in my view, therefore, is reasonable.  So I would make the costs of and occasioned by both defendants’ summonses dated October 2017, with certificate for counsel, be to the plaintiff, save that the costs of today’s hearing be costs in the cause, and obviously it is understood that today’s hearing would include certificate for counsel. 

(Discussion re terms of the order)